Opes Partners Limited v SDOGeneral Limited

[2022] NZHC 239

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-001811

[2022] NZHC 239

BETWEEN

OPES PARTNERS LIMITED

Applicant

AND

SDOGENERAL LIMITED

Respondent

Hearing:	on the papers
Appearances:	S D Campbell for the Applicant S Moore for the Respondent
Judgment:	22 February 2022

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 22 February 2022 at 12.00 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

Solicitors:

Jessica O’Dea, Auckland Wynn Williams, Auckland

S Moore, Auckland

OPES PARTNERS LTD v SDOGENERAL LTD [2022] NZHC 239 [22 February 2022]

Introduction

[1]                  Opes Partners New Zealand Limited (Opes) and SDOGeneral Limited, trading as Unlocked Real Estate (Unlocked) had a commercial arrangement to market and sell real estate. The arrangement involved splitting the commissions which were received. It ended when Opes formed the view that, in breach of the commercial arrangement, Unlocked had not disclosed sales involving purchasers or developers introduced by Opes, and had not made commission payments to Opes.

[2]                  Unlocked served Opes with a statutory demand dated 7 September 2021 for commission payments totalling $51,150. Opes applied to set aside the statutory demand. It disputes the amount demanded, stating that its analysis has established that only $10,295 is payable. Furthermore, Opes maintains that it has a counterclaim or claim to set-off in the form of commissions retained by Unlocked in breach of the commercial arrangement. It says that the quantum of this claim is presently unknown but appears to be more than the $10,295 which would otherwise be due to Unlocked and more than the $57,150 demanded. It applies for discovery orders against Unlocked. It says that without discovery of the documents sought it cannot properly formulate its counterclaim against Unlocked.

[3]                  The application is opposed by Unlocked. Unlocked says that the application for discovery orders is a duplication of an application for pre-commencement discovery which was made and decided separately. Furthermore, it says the discovery orders are not necessary, as on Opes’s own case its purported counterclaim has a compelling evidential basis.

Legal Principles

[4]                  There is no dispute between the parties about the legal principles relevant to applications for discovery for an application to set aside a statutory demand. These were helpfully reviewed by Associate Judge Gendall in Sage Securities Ltd v Rood:1

1      Sage Securities Ltd v Rood HC Wellington CIV-2009-485-1150, 11 November 2009.

[11]              The Court has jurisdiction to make an order for discovery for the purpose of an application to set aside a statutory demand pursuant to r 7.9 of the High Court Rules, and in particular, r 7.9(1)(d):

"7.9 Directions as to conduct of proceeding

(1)  A Judge may, by interlocutory order,- …

(d) direct the steps that must be taken to prepare a proceeding for substantive hearing: … "

[12]      This was confirmed in The Grange Ltd v City Sales Ltd (2000) 8 NZCLC 262,119 at para 8; and Shuttle Petroleum Distribution Ltd v Caltex New Zealand Ltd (2002) 16 PRNZ 126.

[13]        In The Grange Ltd v City Sales Ltd, Master Kennedy-Grant found that the particular discovery sought might "give the lie" to the applicant's case that the statutory demand should be set aside. He found that, as is the case in applications for summary judgment, the Court is entitled to test the evidence of the applicant, and to reject that evidence if it is inconsistent with contemporary documents. The Master concluded at para 18 with a warning:

"[18] While I appreciate that the order that I am about to make may be used on frequent occasions in future in relation to applications to set aside statutory demands (and I make it clear that it is not to be taken as a general precedent but to be limited to cases such as the present where there are clearly identifiable categories of documents some at least of which must exist on the deponent's own evidence), I consider that the proper order to make in this case is one for the discovery of the documents of which discovery is sought."

[14]          In Shuttle Petroleum Distribution Ltd v Caltex New Zealand Ltd discovery was sought by the applicant who wished to set aside the statutory demand. In ordering discovery, Master Faire stated at para 13:

“[13] In principle the same approach [as that taken in summary judgment], in my view should be adopted in relation to applications for discovery where an application to set aside a statutory demand is made. In short, the applications will be confined to those relatively narrow band of marginal cases where an outlined defence including a defence of set-off or a counterclaim is made out but the Court encounters genuine difficulty in determining whether or not the defence to the claim or the counterclaim does exist. If the Court has reason to believe that discovery in the proceeding will or may assist that determination it may be appropriate to order discovery.”

[15]     I have also been directed to the decision of Doogue AJ in Pacific Vineyards Ltd v Wisely Holdings Ltd (2006) 18 PRNZ 371. In that case, the respondent to the application to set aside the statutory demand applied for discovery against the applicant. After referring to Shuttle Petroleum Distribution Ltd v Caltex New Zealand Ltd and the judgment of McGechan J in NZI Bank Ltd v Philpott (1988) 1 PRNZ 560, Doogue AJ found at para 18:

" … if the determination (in applications to set aside statutory demands) of whether or not there is a properly arguable defence to go

to trial is finely balanced, then resort may be had to discovery to assist the Court in making its determination. In such a case, the Court will allow the exceptional course of discovery to be followed because otherwise there is a risk that injustice will be done to the debtor in that it will not be given the opportunity to air its defence in substantive proceedings and yet there is a possibility that it does have a reasonably arguable defence."

[16]      The applicant's defence in that case concerned the contents of an oral agreement. On the evidence already before the Court, it was apparent that there was a direct collision between the parties as to their recollection of what was agreed to. Doogue AJ was satisfied that the applicant had a good arguable defence, and that the Court did not need any further assistance to resolve the question of whether that defence had a reasonable basis such that the statutory demand should be set aside. As such, the respondent's application for discovery was dismissed.

Decision

[5]                  This case has the additional feature that in parallel to this statutory demand proceeding, Opes applied under r 8.20 for pre-commencement discovery of the same categories of documents as those sought here. It sought the discovery to enable it to draft a proper and compliant statement of claim against Unlocked. In a judgment delivered on 22 November 2021, Woolford J ordered Unlocked to give discovery of the first and fourth categories of documents sought and a refined version of the second and third categories.2 This decision was delivered after Opes’s application to set aside the statutory demand and for discovery was filed on 21 September 2021.

[6]                  In reaching his decision, Woolford J found that Opes had established that there was at least “the real possibility of a claim” as required for an order under r 8.20. Furthermore, his Honour found that it was impracticable for Opes to formulate its claim without reference to documents under the control of Unlocked.

[7]                  I see no reason to depart from the finding of Woolford J that Opes has established the outline of its claim/counterclaim against Unlocked for breach of contract and/or breach of fiduciary duties and/or misuse of confidential information. The difference between the threshold for an application under r 8.20 and an application for discovery to support an application to set aside a statutory demand is not material. In any case, I am satisfied based on the evidence of Andrew Michael Nicol, director

2      Opes Partners New Zealand Ltd v SDOGeneral [2021] NZHC 3147.

of Opes, that Opes has established “the outline of a counterclaim” to the statutory demand.

[8]                  I am less certain that this is one of those exceptional cases where an outline counterclaim is made out, but the Court is likely to find it difficult to determine whether the counterclaim is genuine without the discovery sought. I note that in this respect I am faced with a different threshold to Woolford J. In short, it is arguable that Opes has done enough through the affidavits of Mr Nicol to meet the threshold required to have the statutory demand set aside. It is well-established that an applicant seeking to set aside a statutory demand under s 290(4)(b) of the Companies Act 1993 is not required to prove the counterclaim. It is merely necessary to present sufficient evidence to establish a reasonably arguable case.3

[9]                  Had Woolford J not already ordered discovery of the documents Opes now seeks to draft its claim/counterclaim, I might have declined to make the order on the basis that the discovery is not necessary. However, it would be a nonsense for me to decline discovery when it has already been ordered in another proceeding for the very purpose of enabling Opes to formulate a claim/counterclaim against Unlocked, based on which it seeks to resist the statutory demand. I will therefore order discovery in this proceeding, but subject to the same refinement ordered by Woolford J.

Result

[10]I order:

(a)Unlocked is to provide Opes with discovery of the following categories of documents within 15 working days:

(i)documents relating to any active or former agency agreements entered into by Unlocked or Mr Osner between April 2017 – June 2021;

3      DNS Forest Products 2009 Ltd v Logic Forest Solutions Ltd [2018] NZHC 1214 and Auravale Industries Ltd v Shalimar Knitwear Ltd (1999) 8 NZCLC 262,074 (HC).

(ii)documents relating to any agreements for sale and purchase of real estate involving any person listed in the Opes list of developers or in the Opes list of clients  where  Unlocked or Mr Osner provided real estate agency work in relation to that transaction between April 2017 – June 2021;

(iii)documents relating to commissions or income paid to Unlocked or Mr Osner for property transactions involving any person listed in the Opes list of developers or in the Opes list of clients where Unlocked or Mr Osner provided real estate agency work in relation to that transaction between April 2017 – June 2021, including, but not limited to bank statements and invoices;

(iv)documents relating to any communications between Unlocked, Mr Osner and any of the persons listed in the Opes list of developers or in the Opes list of clients.

(b)The following information is confidential (on the terms outlined in Schedule 3 to the originating application) as it contains commercially sensitive information about Opes’ business:

(i)information relating to the amount of commission Opes charges on the sale of a development;

(ii)information relating to the terms of its commercial arrangements with Unlocked and Mr Osner;

(iii)information relating to Opes’ business model;

(iv)information relating to the identities of the developers it has relationships with and persons contained in the list of clients it has or will provide to Unlocked for the purposes of this discovery.

[11]Costs are reserved.

Associate Judge Gardiner